A northern California man was arrested Wednesday and charged with running a phony hedge fund with phony auditors, phony investment claims and even phony principals.

James Murray was charged with wire fraud and remains in custody pending a March 20 detention hearing. According to the Securities and Exchange Commission, which sued Murray alongside the criminal charges, Murray raised $4.5 million for several funds, including a "purported hedge fund," Market Neutral Trading. To keep up the ruse, he offered a "bogus audit report that embellished the financial performance of the fund."

But the audit report wasn't the only thing that was bogus: The auditing firm, according to the SEC, wasn't even an auditing firm, but "a shell company that Murray secretly created and controlled." Even Jones, Moore & Associates' name principals, Richard Jones and Joseph Moore, are made up, according to the regulator, as well as at least five other "professionals" listed on the JMA Web site, which was "paid for by a Murray-controlled entity."

The criminal charges allege that Murray defrauded a credit card processing company, using a merchant account established by the allegedly phony auditor. The scheme cost Chase Paymentech some $350,000, the complaint alleges.